Government notifies 100% FDI in single brand retail

NEW DELHI: Notwithstanding its inability to open multi-brand retail for foreign investment, government on Tuesdsay notified 100 per cent FDI in single-brand retail, paving way for global chains like Adidas, Louis Vuitton and Gucci to have full ownership of their India operations.

"Foreign Direct Investment (FDI), up to 100 per cent , under the government approval route, would be permitted in single brand product retail trading," a press note by the Department of Industrial Policy and Promotion (DIPP) said.

However, in respect of proposals involving FDI beyond 51 per cent, the mandatory sourcing of at least 30 per cent would have to be done from the domestic small and cottage industries which have a maximum investment in plant and machinery of USD 1 million (about Rs 5 crore).

"FDI in single brand has led to emergence of some global majors in Indian market...This will provide stimulus to domestic manufacturing value addition and help in technical upgradation of our small industry," Commerce and Industry Minister Anand Sharma said.

The decision to increase FDI in single-brand retail was taken by the Cabinet on November 24 along with opening the gates for overseas investment in multi-brand retail.

However, the Government was forced to put on hold FDI in multi-brand retail by several political parties, including UPA ally Trinamool Congress.

At present, for single-brand retailers, 51 per cent FDI is permitted. Removal of investment cap would help global fashion brands especially from Italy and France to strengthen their interest in the growing Indian market.

Many big names have already set up their operations in the country by partnering with Indian partners. The new policy would allow them to buy out the domestic partners.

The government said the move which comes into effect immediately would enhance competitiveness of Indian enterprises through access to global design, technologies and management practices.

According to the riders, however, the products by the global chains should be of 'single brand' only and be sold under the same brand internationally.

Single brand retailing would cover products which are branded during manufacturing and the foreign investor should be owner of the brand.

Though 51 per cent FDI in single brand was allowed in February 2006, not much investment has come in the sector. During last three and half years, FDI worth only Rs 196 crore was received in the sector.

Experts hailed the decision and said that the move would make India a retail destination and help in enhancing foreign investments.

"It is an excellent move which would help in bringing more FDI into the country," KPMG Executive Director Krishan Malhotra said. "The decision would help in bringing latest products and technologies. It would also provide more choices to consumers," PricewaterhouseCoopers Associate Director Goldie Dhama said.